Should you invest in the Zip share purchase plan?
Zip Co has launched a $30 million share purchase plan. Here's what you need to know.
Zip released details of its share purchase plan (SPP) on Wednesday, following a $120 million capital raise for institutional and wholesale investors last week.
Stocks are being offered at $5.34 a share, or 2% below Zip's average share price during the final week of the offer. This means you get a discount through the SPP even if Zip's market price dips below $5.34 as the offer closes.
How it works
To participate in the purchase plan, you need to have been a Zip shareholder as of 15 December 2020 and an Australian or New Zealand resident.
The offer period itself opens on 4 January 2021 at 9am and closes at 5pm 13 January.
Buying shares via a share purchase plan isn't the same as buying shares over the stock market. Because they're new, you apply for shares directly through Zip rather than through a broker, which means you won't need to pay a commission fee.
However, it does typically mean there are restrictions around how many shares you can purchase. In this case, eligible investors will have the option of buying between $2,000 and $30,000 worth of Zip in $1,000 increments.
To apply for shares, you'll need to fill out an application form on the offer homepage and transfer funds via BPAY, bank transfer or cheque.
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Is the Zip SPP a buy?
Zip's $120 million capital raise last week saw stocks sold at a 4% discount to the market, but its price has since fallen. As of midday Thursday, Zip's share price was 2.6% below the $5.34 SPP offer.
According to managing director of Medallion Financial Michael Wayne, how attractive the share purchase plan will be will depend on your situation.
"Given the current market price ... I think we can safely say the offer isn’t a bargain buy. If I was a shareholder I would pass up on the offer given it isn’t at an attractive enough discount to entice me," Wayne told Finder.
"The one exception is if I was an existing shareholder who already had a plan to increase my exposure at some stage. This SPP offers that opportunity to build on an existing position brokerage free and at a discount, albeit a very slight discount."
Wayne's advice for potential investors is to wait until the closing date to make the final decision.
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